Insurance Article, The Insurance Times 2021, The Insurance Times April 2021

INSURANCE-BUYING TECHNIQUES AND UNDERSTANDING THE POLICY

The Indian Insurance market is phenomen only composed of Life Insurance Companies, General Insurance Companies, Health Insurance Companies and some specialised insurance companies taking care of some special requirements of the society. The other category which can be substancially narrated as Government, Private sectors and Foreign enteties.

The major role of insurance is to pay some money, to make some repairs, to replace a destroyed or stolen property or to replace to some degree lost incomes following the death of a policyholder. There are two types of insurance i.e. general and life.

General insurance pays money, replace lost or destroyed property as a result of misfortunes such as fire, strike, storm, pests, drought, flood, theft and the like. Life insurance, on the other hand, pays the policyholder if he survives the policy period or his dependents in the event of his untimely death or disability. The problem that many people face when seeking to buy insurance is deciding which policy(s) to buy now!

Below are some tips that may help you select the right insurance product for your needs:

If you own a motor vehicle or you are an employer, always ensure that you buy the compulsory motor vehicle third party insurance and workers injury benefit insurance.

Plan to have a life policy which will pay some money to your dependents in the event of your untimely death. This can go a long way in assisting the family in settling down as they cope with the reality of the loss. How much life insurance do you need?

A quick rule of thumb for measuring your life insurance needs is to multiply your current annual income by a factor between 10 and 15. For instance, if you earn 50,000 a year, you would require about 500,000 worth of life insurance benefits in the event of death.

Take insurance for your treasured possessions such as business, home, crops or livestock because their loss will cause you financial loss that may be quite difficult to cope with, at times even changing completely the lifestyle of your family.

It is advisable to arrange for health insurance for yourself and family because sickness comes suddenly when money is not available. You may not even have no time for raising that money.

Education is increasingly becoming more expensive. However, the future belongs to the educated and everybody would like their children to have the best education. It is not always possible to have enough money to pay school fees as well meet other competing needs of life. An education policy can take care of this by allowing you to pay small regular amounts from the time the children are born or when still young.

We are all growing old day by day. People are also more likely to live longer after retirement, thanks to medical advancement. During that time you will not be able work due to old age yet you still have needs to meet.

It is, therefore, advisable to arrange for income to rely on during these times. Life policies, investment plans, pension plans, annuities, and deposit administration schemes are best suited to meet old age needs .

Illness is a risk we live with right from birth to death. It is important to plan for illness in order not to be caught unawares should it strike. Illness can at times be critical e.g. stroke or heart attack. Medical policies take care of hospital expenses incurred as a result of illness.

We are always exposed to accidents either falling off, getting mugged or hit by a vehicle or any object. Personal accident policies pay a given sum of money to the policyholder or his/ her beneficiaries following an accident that often results in injury, disability or death.

In order to buy valid insurance, always ensure that the insurance agents you are dealing with are licensed by the IRDAI. Deal with an insurance company with an office near you. This saves a lot of time when you require their services.

IRDAI is passing a lot of valuable information about insurance on TV, Newspaper and other print media and electronic media (Bima Bemisal), both Hindi and vernacular radio stations, providing reading materials through its website of at its offices, in  many other forms.

Understanding the Insurance Policy

An insurance policy is a legal contract between an insurance company and a policyholder. It is the evidence that you are insured and is normally issued after paying the premium. As a policyholder, it is important that you read and understand your policy.

This will enable you to verify whether it meets your insurance needs. Further, reading the policy will help you understand your rights and obligations as well as those of the insurance company. There are a number of terms used in an insurance policy and which, as a policyholder, you need to understand and familiarize yourself with:

Title of Policy: This section indicates the class or type of policy that you are taking and also includes the name and address of the insurance company.

The Preamble: Sets out the necessary conditions that must be met by the parties before the completion of an insurance contract. It identifies the parties to the contract, the agreement, the proposal form, the premium amount, refers to the policy schedule, any report or other document relating to the policy, policy terms and conditions, compensation upon the happening of the insured event and the sum insured.

Policy Schedule: Outlines your name and address; type of policy taken; the policy number; your business or profession; date of commencement of cover; period of insurance; sums assured; premium amount and provision for signature of the insurance company’s authorized official. It also contains cover limits defining the highest benefits payable in case of a loss.

Definitions: Defines the terms used in the policy document. This section is very important and is meant to guide you in understanding your policy. You are required to refer to it when reading the policy.

Policy Benefits: Describes the types of benefits the policy will pay in the event of a loss. These include theft, burglary, death, disability, surrender and maturity benefits among others.

Policy Exclusions: Exclusions are risks the insurance company is not prepared to cover under the policy. Examples include HIV/AIDS, riot, intake of illegal drugs & alcohol and war, among others. Some insurers, however, allow policyholders to buy back some of the exclusions by paying additional premium.

Policy Conditions: These are rules guiding the policy such as how to revive a lapsed policy, surrendering a policy, rules guiding policy loans, loss of policy document, duty of disclosure and policy cancellation and termination.

Signature and Attestation: This section contains a place for the signature of the insurance company’s authorized officer and the policyholder’s signature. You are required to sign this part of the policy only when satisfied with the policy. You have a maximum of thirty (30) days, also known as the cooling off period, within which you can decide to sign or refuse to sign the policy.

Many buyers of insurance sign policies without understanding its terms and proceed to keep it safely only to produce it at the time of a loss. This is dangerous and is synonymous with using a driving license to which you have not appended your signature and whose expiry date you do not know. Note that different policies have different terms .

In case you do not understand any terms in your policy, contact your insurance agent, medical insurance provider, insurance company or IRDAI for further guidance.

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